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AOL reports $1.2 billion in holiday shopping

The online service says its members spent more than $1 billion with online retailers available through AOL during the 1998 holiday shopping season.

America Online today went a long way toward dispelling any doubt that it is the big kahuna in online commerce.

The company announced that it generated about $1.2 billion in holiday sales for its retail partners, which analysts say may represent as much as half the total amount spent online.

As successful as the holiday season was, "it's really only beginning,'' said AOL spokeswoman Wendy Goldberg.

AOL in general charges its online retail partners a flat fee for placement, so the company won't see any revenue spike resulting from sales. But the season will likely put even more of a premium on AOL's space. "This will give them leverage with retail partners," said Ken Cassar, e-commerce analyst with Jupiter Communications.

AOL's numbers, which it said were gathered by an independent outfit called Internet Research Group, are in line with Jupiter's own seasonal estimates, Cassar said. Jupiter had forecast total holiday online spending of $2.8 billion.

AOL, through its proprietary online service and its Web site, drives about 40 percent of all e-commerce sales, Cassar said. "And AOL is even more holiday-weighted thanks to its drawing in a lot of first-time online shoppers," during the season, he said. According to AOL, 1.25 million of its 15 million customers made their first online purchases over the holidays.

AOL said the average shopper on its system bought two items online a week during the season, which that ran from the day after Thanksgiving to December 27.

On the heaviest online shopping day of the season, December 17, AOL's online retail partners rang up $36 million in sales.

AOL shares were down 6.3125 today, to 148.8125. Last week, the stock enjoyed a spike thanks in part to the company's announcement that it had passed the 15 million-customer mark.

Based on the number of hits on its shopping Web pages, AOL said its "Toys, Kids and Babies'' category was the most popular, followed closely by apparel, the most popular online shopping destination overall last year.

With the holidays over, subscribers can still surf AOL's Mega-Clearance Sale, and the company expects the strong holiday sales to translate into steady business for its retail partners through the year.

"They'll come back to do it not for convenience but because they can and they know how to now,'' Goldberg said. Reuters contributed to this report.